By: Juan Martinez
Most businesses that have moved beyond the startup phase are likely looking into acquiring enterprise resource planning (ERP) software. Whether you’re trying to get a handle on how your customer relationship management (CRM) efforts are impacting your bottom line, or if you’re tracking revenue from point-of-sale (POS) to research & development (R&D), ERP can be an asset to your company.
Although ERP is one of the older segments of the business software landscape, ERP vendors are consistently evolving to become more powerful, more affordable, and less complex. Mega-vendors such as Oracle and SAP have a major share of the ERP market, but newer companies are nudging their way into the space with Software-as-a-Service (SaaS) options that are changing the game. In this piece, we’ll examine the most important trends to expect from the ERP industry in 2017.
1. ERP and SaaS
Traditional ERP applications are stored on your servers, which means you’re responsible for upfront hardware costs, long-term hardware maintenance and expansion, and data backup and recovery. SaaS-based apps are stored on cloud-based servers, which are much less expensive, much quicker to update and scale, and don’t take up any valuable office space. This difference can mean a savings of thousands of dollars in terms of total cost of ownership (TCO).
In several other business app sectors, including CRM, HR, and talent and procurement, SaaS has become the default deployment model for new implementations, according to Forrester Research’s “Vendor Landscape: SaaS ERP Applications, 2017” report. For ERP systems, the report says, “the shift to SaaS will accelerate over the next three years and become the preferred deployment option for many types of businesses. For large enterprises, adoption will be more restrained near-term, but solutions are maturing quickly, and we will see significant adoption at scale for complex businesses within five years.”
If you’ve already heavily invested in your vendor’s on-premises ERP tool, then don’t immediately jump ship to the same vendor’s SaaS product. Your incumbent on-premises ERP vendor may offer an attractive migration path to SaaS, according to Forrester’s report, but you’re advised to “take care to understand the benefits and costs of such a project—and whether the new SaaS offering delivers relevant architectural, flexibility, and usability advantages similar to products natively built for SaaS.”
2. SaaS-Only and Mixed ERP Options
Although the software landscape seems to be an either/or proposition, you don’t have to abandon an on-premises product in favor of a SaaS tool. Often, you can work with your vendor (depending on which company it is) to build a mixed model, which gives you the flexibility to add new SaaS-based modules to your ERP tool without having to start from scratch.
For example, if your on-premises ERP tool works perfectly but you’d like to add document management and CRM to the mix (without having to purchase additional hardware), then you can plug SaaS modules on top of your existing ERP. This is becoming a more popular option for users, especially as more business IT becomes cloud-based. Make sure to speak to your current vendor or potential vendors to find out if this is an option.
3. ERP for the Subsidiary
In speaking with ERP vendors, Forrester has determined that enterprises that have historically relied on on-premises ERP are now deploying SaaS-based tools incrementally through the enterprise. Rather than replace ERP whole-hog, large companies are choosing one slice of the business and plugging in SaaS ERP on a trial basis. This approach gives businesses the opportunity to monitor SaaS ERP performance to determine how it might fit into the existing on-premises ERP implementation, or whether it should replace on-premises ERP throughout the entire organization.
“The two-tier deployment model enables you to rapidly deploy SaaS ERP in subsidiary businesses while continuing to run an on-premises corporate ERP. This model effectively accelerates SaaS adoption in smaller to midsize business units and may provide a path to enterprise adoption of SaaS ERP in the future,” the Forrester report states.
4. Competition from Disruptors
As I mentioned in my introduction, the ERP behemoths that have traditionally dominated the industry are facing stiff competition for SaaS-only startups. Companies such as FinancialForce (which was founded in 2009 and already has more than 1,300 ERP customers) and Kenandy (founded in 2010) are building solutions on the Salesforce App Cloud to make their solutions more appealing to users of the most popular CRM and sales automation tool.
“In assessing the landscape of SaaS ERP vendors, we find significant differences among the 18 representative vendors surveyed in terms of customer adoption, deployment options, and go-to-market strategies,” the Forrester report states. What’s especially interesting about the newcomers listed in the report is that they’re targeting large enterprise customers as opposed to small to midsize businesses (SMBs) and small to midmarket customers.
5. The Internet of Things
As more devices and products become connected to the internet, more data can be automatically funneled into the ERP system. This gives you better oversight over things such as the supply chain, your shipping partners, and appliance performance. Harnessing this data could prove beneficial across all industries.
Unfortunately, most products aren’t connected to the internet and most companies can’t afford to bring this ambitious project to life. However, look to large enterprises to begin building out their Internet of Things (IoT) ecosystems and leveraging ERP tools to take action on the data created by this connection.
Forrester declined to provide comment beyond providing PCMag with a copy of their “Vendor Landscape: SaaS ERP Applications, 2017” report.